Building Resilience: The Importance of an Emergency Fund

Life has a way of surprising us—both in good ways and bad. A flat tire, a broken furnace, or an unexpected trip to the doctor can happen to anyone.

That’s where an emergency fund comes in. Think of it as your financial airbag. You hope you never have to use it, but if you do, you’ll be glad it’s there.

How Big Should Your Emergency Fund Be?

The ideal size depends on your situation. A general rule of thumb is to save 3–6 months’ worth of essential expenses. That includes:

• Rent or mortgage
• Utilities
• Groceries
• Insurance

If that sounds intimidating, start small. Your first goal should be $1,000. That’ll be enough to cover most minor emergencies and give you some breathing room.

The next goal would be to create an unemployment buffer, in the event you lose your job. For most, that’d be an emergency fund that can 3-6 months of expenses, including vehicle payments, mortgage or rent payments, utilities, groceries, and other necessities. On average, that looks to be about $6000. Our app helps with making and sticking to goals like building an emergency fund.

How to Build Your Fund

Building an emergency fund reuses some of the techniques in planning debt repayment:

• Treat it like a bill: Set up automatic transfers to a separate savings account each payday.
• Redirect windfalls: Bonuses, tax refunds, or even cash gifts can go straight into your emergency fund.
• Make temporary sacrifices: Cutting back on non-essentials for a few months can get you there faster.

Again, our goals function can help you with tracking your progress.

Where to Keep It

An emergency fund needs to be safe and easy to access—but not too easy. A high-yield savings account is perfect. It earns interest while keeping your money within reach for true emergencies.

Once your emergency fund is in place, you’ll have the confidence to focus on long-term goals, like retirement.